Benefits sanctions

Over seventy years ago, Juliet Rhys Williams, a member of the Beveridge committee, [note]Sir William Beveridge, Social Insurance and Allied Services, Cmd 6404, Her Majesty’s Stationery Office, London, 1942[/note] objected to the majority’s recommendation of time-limited National Insurance benefits topped up by means-tested National Assistance. In her minority report (later published as Something to Look Forward to) she pointed out that means-tested benefits would mean that many families would receive too little of any additional earnings and that there would therefore be too little incentive to seek paid employment. This would mean that coercion would be required to get people to accept employment. Rhys Williams would have preferred an unemployment benefit that was not time limited and was not withdrawn as earnings rose:

The hope of gain is infinitely preferable to the fear of punishment and the fear of want as a motive for human labour . . . The real objection to the Beveridge scheme does not lie in its shortcomings in respect of the abolition of want, which could be made good, but in its serious attack upon the will to work. [note]Juliet Rhys Williams, Something to Look Forward to, MacDonald and Co., London, 1943, pp.13, 45, 141[/note]

Rhys Williams’ prediction is even more relevant today than it was then. Employment is becoming more precarious. [note]Guy Standing, The Precariat: The New Dangerous Class, Bloomsbury, London, 2011[/note]  To accept precarious employment is to lose means-tested benefits and then to have to reclaim them and suffer the inevitable income gaps. ‘Universal Credit’ is meant to improve on this experience, but, whereas now, entering employment means moving from out-of-work means-tested benefits to in-work means-tested benefits, under Universal Credit the shift will require a seamless computerised administrative transition within the same means-tested benefit. This will be no more seamless in practice. The ‘precarity trap’ is Guy Standing’s term for the way in which these income transitions disincentivise employment. It compounds the unemployment and poverty traps (the results of means-tested benefits being withdrawn as earnings rise), and makes ever more necessary the coercion represented by benefits sanctions and predicted by Juliet Rhys Williams. There will be no escape from benefits sanctions until our benefits system is based on a genuinely universal benefit that is not administratively precarious and is not withdrawn as earnings rise.

But isn’t a return to full, secure and well-paid employment the answer to this problem? It would be if it were possible, but unfortunately it isn’t. Employment is becoming more precarious, and although there are still ‘good jobs’, the number of ‘lousy jobs’ is growing and ‘middling jobs’ are disappearing. [note]Maarten Goos and Alan Manning, ‘Lousy and Lovely Jobs: The rising polarization of work in Britain’, Review of Economics and Statistics, vol.89, no.1, pp.118-133, 2007[/note] The reasons for this are complex ( – the average annual rate of return on capital is rising faster than the annual rate of growth of the economy, [note]Thomas Piketty, Capital in the Twenty-first Century, Belknap Press, Cambridge, Mass. 2014, pp 22-7[/note] which means that a smaller share is going to wages and investment; rising inequality reduces yet further the share of GDP going to low earners; [note]Stewart Lansley, ‘From inequality to instability: Why sustainable capitalism depends on a more equal society’, Fabian Review, The Fabian Society, London, Winter 2011, pp.12-14[/note] whilst new technology creates new jobs it also destroys old ones): but whatever the reasons, even if a return to full full-time employment were to be possible, this would not necessarily be desirable if it were to increase the rate at which we were using up the planet’s resources.

Anna Coote of the New Economics Foundation argues that a shorter working week would help to deliver the kind of sustainable economy that we shall need, and that it would reduce unemployment, improve wellbeing, and increase opportunities for engagement in caring, community, and political activities. If a shorter working week were to be achieved, then clearly it would deliver the promised benefits for individuals, families, and society as a whole: but it is difficult to see how a shorter working week is likely to be achievable in the context of a benefits system (including so-called Tax Credits) that withdraws additional income rapidly at low numbers of hours of National Minimum Wage employment. (8) For higher earners, shorter working weeks are always a possibility: but for lower earners they are not.

Juliet Rhys Williams’ solution to the problem was that every adult citizen should receive an income from the State, and that this should not be reduced if the citizen earned an income or if their earned income rose:

The State owes precisely the same benefits to all of its citizens, and should in no circumstances pay more to one than to another of the same sex and age, except in return for services rendered . . . Therefore the same benefits [should be paid] to the employed and healthy as to the idle and sick. . . . The prevention of want must be regarded as being the duty of the State to all its citizens and not merely to a favoured few. [note]Juliet Rhys Williams, Something to Look Forward to, MacDonald and Co., London, 1943, pp.139, 145[/note]

A Citizen’s Income – an unconditional and nonwithdrawable income for every individual – would provide an income floor on which everyone could build. It would enable low earners to earn their way out of poverty more quickly than they can now and so would therefore reduce income inequality. It would not be withdrawn as earnings rose, so it would not be withdrawn faster for part-time employees than for full-time employees and it would therefore make more possible the kind of shorter working week that the New Economics Foundation would like to see. A Citizen’s Income would therefore enable parents more easily to care for their own children, would give to more people the option of spending their time on community and political activity, and would give to families and communities the time to create for themselves many of the services that they currently purchase in the market. Whether the economy would be more sustainable is a question that only experience would be able to answer, but I suspect that it would be, because, as the Green Party suggests,

saving the planet is down to all of us, but we cannot expect people still stuck in the poverty trap to think of it as a priority. Creating a fairer society and saving the planet go hand-in-hand. [note]Green Party, Citizen’s Income: An end to the poverty trap, Green Party, London, 2008[/note]